An Interview with Rick Rice, Assistant Secretary of the California Labor and Workforce Development Agency

On April 19, 2004, Governor Arnold Schwarzenegger signed SB 899 into law and claimed the legislation would "deliver meaningful workers' compensation reform." He claimed that the new law would "save jobs, reduce costs for our employers and improve care for injured workers." He claimed that, "No longer will workers' compensation be the poison of our economy." In recent years, costs have soared from $6.4 billion paid in 1997 to an estimated $17.9 billion in 2003.

The major provisions of the new law include:

Allow employers and insurers to create network pools of doctors. Employees may seek second opinions from their choice of doctor within the pool. An independent medical review process allows appeal of the pool doctor's decision and use of an independent doctor if appeal is upheld.

A two-year cap on temporary disability payments (there are exceptions).

Employer incentives for return to work of disabled employee and increase of benefit if the employee is unable to return.

Objective and uniform permanent disability schedule

Apportions payments to the actual cause of injury and prohibits payments for injuries or portions of injuries which occurred outside of the workplace. SB 899 caps multiple awards at 100% for any single region of the body.

Late payment penalties are capped and are assessed on the actual late payment rather than the entire award.

Skeptics of the reform point to the lack of controls on insurance companies. The governor has responded that reforms will spur competition among insurers and create a climate for lower rates. While the politicians bicker about the effect of the new law, employers and employees are more interested in the immediate practical consequences. How soon will they see any changes in benefits? How much longer do employers have to pay exorbitant rates?

Tri-City Voice asked Rick Rice, Assistant Secretary of the California Labor and Workforce Development Agency about the transition.

TCV: How will the new Workers' Compensation law be implemented? What will happen if an employee is involved in an injury today?

Rice: It will take some time since this is an extremely comprehensive reform bill and there are a number of provisions that will be phased in. Some parts of the new law will be retroactive, in terms of implementation. It's going to take a little while.

TCV: What happens to an employee today, under this new law? Should he or she be treated from an approved list of doctors and be regulated by the new law?

Rice: Obviously, you can't do anything until the regulations are in place, so you have to continue under the current system until it has been reformatted with the changes in the law.

TCV: Is there any time estimate of the transition period?

Rice: In the bill, some things aren't slated to go into effect until January 1, 2005. I think the medical aspect of it is one of those components. The bill is giving the department enough time to figure out how the new system is going to work and put regulations in place before it becomes effective. Some of that is built into the bill.

TCV: I thought it was passed as an "urgency" bill.

Rice: It is which means that it goes into effect immediately. By going into effect, it means the department can start doing things to put the new system into place. It doesn't mean that the system is changing overnight. It means that the bill is telling the department to change the system by specific dates.

TCV: Is the January 1, 2005 deadline for some provisions firm?

Rice: I think January 1, 2005 is when most things kick in. I think that should give the department enough time to put the doctor networks provision in place.

TCV: What about the fifteen percent provision, where employee payments are either reduced or increased depending upon whether somebody comes back to work for the same employer or not, is that in effect now or is that also one of those things that will take some time? When will employers see a drop in the bill? What should employees do? It sounds like you're telling me that they should follow the same pattern as they did before the bill passed and eventually the system will phase this is in.

Rice: That's exactly right.

TCV: Looking at specific parts of the bill, what about things like the 15% credit. If the law is in effect, does that mean that these payments will be take effect retroactively or at some future point? What about limitations and caps. Are these provisions retroactive?

Rice: We just got the bill ourselves. We have an implementation phase that we have to go through before the system can be changed. As I said, the bill provides for giving the department time in which to provide a new system that meets all the components of the bill. If you think that everything is changing overnight, it's not. But everything is definitely changing.

In some of the things you mentioned, regulations have to be in place - the procedures have to be in a regulatory format. Until they are, people aren't expected to comply with certain aspects. It's a phase-in period for these things.

TCV: Many of our local employers are in dire financial straits because of Workers' Compensation premiums. How much longer do they need to hold on? This is a massive system to change.

Rice: Well, we've done it before and we can do it again. In '93, the department had to enact some major reforms as well. It isn't as though we are not familiar with how to accomplish these types of regulatory challenges. Rest assured, the department is going to work as quickly as possible. We want to implement this bill as quickly as we can. It's important to everyone out there, both injured workers, whose benefits are going to increase and to employers who have to foot the bill for this program.

TCV: How can people get updates on the implementation? Where can they get information?

Rice: The best place to get it would be the website for the Department of Industrial Relations. We plan to put up a status report of implementation of the new legislation on the website. That's www.dir.ca.gov. There will be periodic updates on the workers comp implementation.

TCV: Are you anticipating local meetings for Q and A at some point?

Rice: Yeah, we are planning a series, actually for new businesses, and I'm sure Workers' Compensation insurance will be discussed. Our website is going to be a key area for information and to get the facts.

You can read the history and bill SB 899, at http://www.legislature.ca.gov.Updates from California Labor and Workforce Development Agency www.dir.ca.gov